eBay Inc (NASDAQ:EBAY) recently announced that it would part ways with PayPal, Inc., and both the companies would operate as a separate entity from 2015. Activist investor, Carl Icahn called in February that both the companies should split in order to grow in their respective businesses. But eBay managed to deflect those thoughts for almost 6 months. PayPal, Inc. Co-Founder and Venture Capitalist, Peter Thiel talked on CNBC about his views on the split and future of the payment business.
Thiel mentioned that when eBay Inc (NASDAQ:EBAY) acquired PayPal, Inc. in 2002, 75% of PayPal’s business volume was in eBay, which reduced to 50% in 2008 and that has drastically reduced to 25% now. So Thiel thinks that it makes a lot of sense for the companies to part ways and try to build on their core business.
“[…] So companies have naturally diverged. It makes sense for them to spin it out again and for PayPal to be able to focus 100% on building good payment system,” Thiel mentioned.
PayPal, Inc. will soon split with eBay Inc (NASDAQ:EBAY) and operate as a separate entity. With ever growing competition in payment business as Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOGL) launched their very own payment products, it makes a lot of sense if some of these big tech names acquire PayPal to add a feather to their cap, or PayPal opting for a merger or acquisition of some small players to strengthen their stand.
Thiel thinks that mergers would make sense only if synergy exists between the companies that merge. He was unsure about how the synergy will work out between PayPal and any other company. He mentioned that it makes a lot of sense for PayPal to operate as a standalone for many years to come.
“[…] I think it makes sense with it to be a standalone company for many years to come,” Thiel said.
Thiel thinks that a lot of payments are migrating towards mobile based payments and he expects that a lot of innovations might happen in the near future in that sector. He added that new players like mPesa, Apple Pay and many others are trying to eliminate credit card from the payments by making a seamless payment system through mobiles.
Thiel thinks that with migration of Apple Inc. (NASDAQ:AAPL) and other companies into mobile payments, the companies like Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA) might not get impacted as bad as people think.
eBay Inc (NASDAQ:EBAY) is under a lot of pressure from competitors like Amazon.com, Inc. (NASDAQ:AMZN) and Alibaba Group Holdings Ltd (NYSE:BABA)’s IPO and this split might also help them in concentrate more on their core business growth.
As of 30 June 2014, Carl Icahn’s Icahn Capital Lp hold around 30.8 million eBay Inc (NASDAQ:EBAY) shares.
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